Friday AM in Grain and Oilseeds 12/17

Good morning

• South Africa Hospitalization Rate Plunges in Omicron Wave– Currently there are about 7,600 people with Covid-19 in South African hospitals, about 40% of the peak in the second and third waves. Excess deaths, a measure of the number of deaths against a historical average, are just below 2,000 a week, an eighth of their previous peak. (Bloomberg)

• Congress approves import ban targeting forced labor in China– Senators gave final congressional approval Thursday to a bill barring imports from China’s Xinjiang region unless businesses can prove they were produced without forced labor, overcoming initial hesitation from the White House and what supporters said was opposition from corporations. This is rubber meeting road when it comes to imports of processed cotton goods from China.  If you look at your shirt and see it was made in China, that manufacturer will now have to prove it was not processed in Xinjiang nor spun with cotton grown in Xinjiang.  Reminder, 4/5ths of Chinese cotton supply is grown in Western China where this is supposedly occurring. I think this was behind the limit up move yesterday in cotton.

  

• We will begin to see new crop wheat trade as foreign governments start to book next year supply.  Jordan booked 60k last night for the price of $327 per MT.  This is cheaper than current offers (last traded in the 360’s) for old crop but well above what early buyers were paying at this time a year ago.  I look for new crop to find support.  Look at buying KC wheat on breaks as well as new crop Minneapolis (U22) as close to $9 as you can get it.

  

• The route in the Turkish Lira continues. Consumer inflation rose more than expected to 21.31% in November, well above the central bank’s mid-point target of 5%, while producer prices rose the most in 19 years. The lira has lost near 50% of its value since the beginning of November. As I mentioned earlier this week, Turkey is the second largest importer of wheat and third largest importer of cotton in the world.

• The hike in rates (it is early in this attempt to normalize) should weigh on the froth in the economy.  While I think this will weigh on commodities, the rising prices in both producer and consumer sectors should support price breaks. What I am talking about is more in the stock market in companies who do not generate profits and the crypto currency markets.  Specifically, the “stable coins” that are essentially backstopped by risk takers and nothing more. Watch dogecoin here.  “Doge” as the kids call it was started as a joke, now has a market cap 1/3 the size of Ford motor.  When margin calls hit (and they will), what gets sold first?

  

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